Firms engaged in business-to-business trade helping to power the economy while retailers struggle with lack of consumer spending
January 12, 2011
Australian firms engaged in business-to-business trade and those exposed to Asian economies are helping to power the economy while retailers struggle with a lack of consumer spending.
These are the emerging trends from the latest Dun & Bradstreet Business Expectations Survey which show near record expectations for sales, profits, capital investment, employment and inventories even while retailers report some of their most difficult circumstances for years.
The latest survey, which examines the March 2011 quarter, shows that although the positive outlook is shared across all sectors, retailers are failing to turn strong expectations into actual performance while firms engaged in business-to-business trade such as manufacturers and wholesalers had a relatively strong finish to 2010 and are buoyant about 2011.
While challenging for the retail sector this trend may be positive for the broader economy as households save a higher proportion of disposable income, reducing their debt levels and increasing the pool of savings for investment elsewhere in the economy.
The distinction between retailers and the rest is most apparent in sales performance.
Expectations for sales in the quarter ahead remain positive with a net result of 31, a figure that is well above any quarter in the six years ending June, 2004 through to March, 2010.
Forty-eight percent of firms anticipate increased sales while 17 percent believe sales will fall.
The sales expectations of retailers is particularly strong, with the retail sales index at 35, three points above the sales indexes for wholesalers and durables manufacturers.
However, despite these significant expectations for the New Year retailers are yet to see strong gains in actual sales.
The impact of this actual sales performance can be seen in selling price expectations.
Overall, the selling price expectations index is down three points to 18.
The sales and profit performance of retailers is showing through in inventory expectations.
Overall, the inventories index is currently at the second highest level (10) recorded in the more than six years since the June quarter 2004.
Twenty three percent of executives expect to increase inventories during the March quarter 2011, while 13 percent plan to reduce stock levels.
Finally, employment expectations are up one point on the December quarter 2010, taking the net index to nine.
RETAILERS VS BUSINESS-TO-BUSINESS TRADE
D&B Director of Corporate Affairs Damian Karmelich says the results signal the clear gap that is emerging between retailers and the rest and provide further insight into the real strength of the Australian economy.
“During the Christmas period there has been an understandable focus on the challenges faced by retailers and the survey shows that retailers are preparing to discount in response to those challenges,” Karmelich says.
“However, for firms engaged in business-to-business trade and exposed to the growth of emerging economies like China the outlook is positive,” he says.
He says there is a clear distinction between retailers and the rest in actual performance.
“The non-retail sector is driving the economy while retailers struggle with household deleveraging.”